High yield bonds carry some of the most compelling yields available in today's fixed income markets, but they also carry risks that demand careful, structured analysis. In this episode of the Bondfish Human Finance Podcast, host Stanislav Polezhaev, CFA, Founder and CEO of Bondfish, is joined by Nikolai Dadonov, CFA, an investment professional and author with deep experience in corporate finance, debt, and capital structure analysis, including senior finance roles in aviation and emerging markets. Together they work through three US dollar high yield corporate issuers — Xerox, Avis Budget Group, and Kohl's — using the Bondfish screener as a live analytical tool to examine business fundamentals, financial profiles, and the key risks embedded in each issuer's bonds.
The Framework
The episode opened with a deliberate methodological statement. Rather than conducting a full credit analysis, Polezhaev and Dadonov set out to answer a more targeted question: why do these particular bonds trade at the yield levels the market assigns them? That framing shaped the entire discussion. For each issuer, the conversation traced the relationship between business fundamentals, financial structure, and the price signals visible in the Bondfish screener, treating high yield bonds not as speculative instruments to be recommended or dismissed, but as transparent reflections of the market's assessment of underlying risk.
The six issuers selected for the session shared three characteristics that made them instructive for this purpose. Each had multiple bonds outstanding across the session's three target currencies, US dollars, euros, and British pounds, offering meaningful yield levels. Most of the bonds were accessible in affordable minimum denominations, typically around one to two thousand dollars or equivalent. And several appeared regularly in Bondfish's weekly top movers newsletter, indicating the kind of price volatility that can create opportunities and risks in equal measure. The three names examined in this first part of the session — Xerox, Avis Budget Group, and Kohl's — represent distinct types of high yield stress: a legacy technology business, a cyclical consumer services company, and a traditional brick-and-mortar retailer.
Issuer Deep-Dive I
Xerox was the most distressed of the three issuers examined. Dadonov framed the company's situation with historical precision: for decades, Xerox was synonymous with the traditional office. Its printers, copiers, and document systems were standard infrastructure in workplaces around the world. But as offices went digital, print volumes declined and the market that built Xerox began to contract. The company now operates in a space that is not growing in most areas and is clearly shrinking in others.
The financial numbers told a consistent story of pressure. Revenue hovered close to seven billion dollars across recent years without demonstrating clear organic growth, while EBITDA margins compressed sharply, falling from around ten percent in 2021 to approximately five percent in 2025. More significantly, net debt to EBITDA rose from roughly three times to nearly eleven times over the same period, and the ratio of EBITDA to interest expense collapsed from 3.4 times to barely one. The company can cover its interest obligations today, but only just. Looking further out, Xerox faces a meaningful refinancing wall from 2028 onward, with larger maturities arriving at a point when the business trajectory remains uncertain.
The company is not standing still. Its acquisition of Lexmark, another printing and document technology business, reflects an attempt to consolidate market share and extract cost efficiencies in a mature segment. The logic is to grow the company's share of a shrinking market while cutting costs through scale. One version of this story ends with Xerox stabilising as a cash-generating, if not growing, enterprise. The other version sees the market contracting faster than the company can adapt, accelerating the deterioration already visible in the leverage metrics. Dadonov indicated that, while he actively invests in high yield bonds, Xerox does not currently fit his personal risk parameters. Polezhaev noted that recent financial engineering activity, including an offer to bondholders to convert a portion of debt into equity warrants, underscored how acutely management is working to relieve pressure on the capital structure.
“Xerox is not a collapse story today, but it is clearly a distressed story. The market, judging by the yield and by the downgrade, is looking at it with a lot of skepticism.
Nikolai Dadonov, CFA, Investment Professional & Analyst
Issuer Deep-Dive II
Avis Budget Group presented a structurally different story, though one equally legible in its bond yields. The car rental business itself is not broken, as both speakers were careful to note: people will continue to rent cars, particularly for airport travel, holidays, and business trips. Avis and its Budget brand remain familiar, high-volume consumer franchises with wide physical distribution. The problem is not the business model but the capital structure built on top of it.
During the post-pandemic period of 2021 to 2023, car rental companies benefited from an exceptional combination of conditions: surging travel demand, constrained vehicle supply, and unusually high used-car prices that inflated the value of their fleets. Margins expanded sharply. Avis used that period to grow, taking on significant additional debt under both its corporate and vehicle financing programs. The vehicle-level debt, Dadonov explained, is largely asset-backed and runs to approximately twenty billion dollars, dwarfing the corporate debt reflected in the leverage metrics shown on screen. The corporate leverage metrics themselves, however, tell a difficult story: adjusted EBITDA fell to around 748 million dollars in 2025, while the interest coverage ratio collapsed as the cost of carrying that debt increased. The company has, in effect, returned to approximately its pre-COVID earnings level while carrying a substantially heavier and more expensive debt load.
S&P downgraded Avis Budget to double-B in February 2026, and Moody's maintained a negative outlook at Ba3. The near-term maturity schedule offers some breathing room, with little due in 2026, but maturities build from 2027 onward. For the market to recover confidence in Avis Budget's bonds, Dadonov argued, margins would need to stabilise at a healthier level and leverage would need to come down. The company's senior unsecured bonds, the paper available on the Bondfish screener, sit in a structurally junior position relative to the much larger asset-backed vehicle financing, a seniority distinction Polezhaev highlighted as important context for bondholders assessing recovery scenarios.
“The golden period of three years is over and margins have fallen back hard. Now they have much less room for error. That is why their bonds trade at these yields.
Nikolai Dadonov, CFA, Investment Professional & Analyst
Issuer Deep-Dive III
Kohl's, the large American department store chain founded in the 1960s and selling clothing, footwear, and household goods through a national network of physical stores, completed the trio. Like Xerox, it is a substantial legacy business operating in a market that has shifted structurally against it. Unlike Xerox, it retains more time and financial flexibility, a distinction the speakers were careful to preserve.
The revenue trend at Kohl's has moved in one direction: from approximately nineteen billion dollars in 2021 to around fifteen and a half billion by 2025. There is no growth story here, and the margin picture is similarly uninspiring. Because Kohl's leases the majority of its store locations rather than owning them, the episode used EBITDAR rather than EBITDA as the relevant profitability measure, folding rent obligations into the coverage analysis. The EBITDAR margin declined from fourteen percent to around ten, with a trough of seven percent in 2022. Fixed charge cover, the ratio of EBITDAR to the combined burden of interest and rent payments, provides the clearest picture of how much operating cushion the company retains against its obligatory outgoings. That cushion, while present, is not generous.
On the debt side, the picture is mixed but not acute in the near term. Leverage runs at approximately four times, and crucially, Kohl's has no significant bond maturities before 2030. That runway is meaningful: it gives the company space to attempt a strategic repositioning without facing an immediate refinancing test. The bonds with the earliest maturity and secured status trade at notably lower yields than the longer-dated unsecured paper, a relationship the screener made immediately visible during the session. Dadonov drew a parallel to Xerox, noting that both companies are large legacy businesses whose core markets are being eroded by shifting consumer behaviour, with e-commerce fundamentally altering the economics of physical retail. The difference, he observed, is one of timing: Xerox is further along that road, while Kohl's retains a somewhat thicker cushion of time and liquidity to find its way through.
Practical Application
Across the three issuers, the episode surfaced a consistent analytical sequence that Dadonov and Polezhaev applied to each name. The framework below distils the steps demonstrated during the session.
Screen for yield, currency, and minimum size. Use a bond screener to identify candidates meeting basic accessibility criteria: target currency, minimum denomination, and a yield level that reflects genuine credit risk rather than liquidity noise.
Understand the business model and its market direction. Ask whether the core market is growing, stable, or structurally declining. A business in a shrinking market faces an inherent headwind that leverage analysis alone cannot capture.
Examine revenue trend and margin trajectory. Flat or declining revenues combined with compressing margins signal a deteriorating earnings base. For lease-heavy businesses such as retailers, use EBITDAR rather than EBITDA to capture the full fixed-cost burden.
Assess leverage and interest coverage. Net debt to EBITDA quantifies how heavily the business is financed relative to its earnings. The EBITDA-to-interest coverage ratio shows whether the company can service its debt comfortably; a ratio approaching one signals acute stress.
Map the maturity wall. Identify when bonds mature and whether the company's earnings trajectory is likely to support refinancing at those dates. Near-term breathing room matters, but a heavy maturity schedule two to three years out demands scrutiny today.
Check bond seniority and security status. Senior secured bonds sit ahead of senior unsecured paper in the creditor hierarchy. In a restructuring, recovery rates differ materially by seniority. A bond's position in the capital structure is as important as the issuer's headline credit rating.
Summary